PROVISION OF BORROWING FACILITIES. 373 



productive use, unless they were limited, as now, to improvement 

 loans; this, however, is not what is meant by 'rural credit/ There 

 are, further, overwhelming objections to general State credit; such 

 are the enormous amount of necessary business with the consquent 

 abnormal development of a bureaucratic agency which, ex kypothe&i 

 would interfere in the daily affairs of every man's life, the gigantic 

 sums required for the supply of general credit ; the development of 

 the habit of leaning upon the State, and of identifying it with the 

 prosperity and misfortune of the people, a tendency to regard the 

 State creditor as a money-lender, who, especially under the popular 

 delusion of the Staters illimitable wealth, could bear to lose individual 

 debts ; the odium attached to the State as enforcing, as it would be 

 bound to enfore, rigid punctuality and complete repayment of dues ; 

 the political objections to a State assuming the position of general 

 creditor with the consequent temptation by its debtors to general 

 repudiation ; the interference with private trade and the stifling of 

 all efforts at self-help. 



Central banks and State banks being thus found objectionable, ijb 

 follows that what will be chiefly required for the credit work of the 

 . Madras districts, are small, local, locally worked institutions on the 

 lines of the European village institutions ; it is Village banks, not 

 District or even Taluk banks, that are required. It does not appear 

 probable that institutions like the great Scotch banks will ever arise 

 to send out their thousand branches and agencies into every village ; 

 the genius of the people and the absence of a note circulation by banks 

 seem to rule out this possibility. In the absence of great institutions 

 with the peculiar ability of the Scotch banks, the only alternative 

 is the local Village bank which satisfies the postulates of proximity, 

 security, and facility, and, in one form or another, is found in 

 thousands of instances in Europe and America ; such are the small 

 Swiss joint stock banks, the Popular banks and Loan societies, the 

 Savings banks, Building societies, Positos, &c. In one form, moreover, 

 viz., that of the co-operative Village bank, it satisfies the final 

 postulate of true credit, viz., that of ' safety ' to the borrower. 



The decisive advantages of Village banks are as follows : 

 (1) their absolute proximity to the borrower, (2) their ability to 

 excite local confidence and consequently to draw in local capital, 

 (-3) their exact knowledge of their clients and Ihoir influence over 

 them as co-villagers ; their consequent ability topivvrnt fraud and to 



